At least the Dow ended the week up … 410 points Thursday, 366 points Friday, a glimmer of optimism that the economy might not be allowed to implode after all.
From the moment word reached Wall Street Thursday afternoon that Treasury Secretary Henry Paulson was about to meet with congressional leaders about a massive bailout plan, stocks soared.
The photo op after the meeting was a picture of cooperation and bipartisan unity.
Then there was Paulson, looking like a man in a hurry, announcing his plan:
"We must now take further, decisive action to fundamentally and comprehensively address the root cause of our financial system's stresses."
And President Bush, speaking to an audience larger than Wall Street, on Friday morning: "Investors should know that the United States government is taking action to restore confidence in America's financial markets so they can thrive again."
Confidence … there is no more ephemeral, or essential, component in what amounts to a huge gamble that our leaders can pull our economy (perhaps even the global economy) back from the brink of collapse. Yes, that's apparently how bad things had gotten.
"These are the most difficult times I think our markets have faced in the last 200 years," former Securities and Exchange Commissioner Harvey Pitt told Martha Teichner.
Pitt spent a dozen years at the SEC and was its head from 2001-2003.
"Certainly it's been historical; it could've been Biblical," said Mark Zandi, chief economist of Moody's Economy.com and author of the book "Financial Shock: A 360º Look at the Subprime Mortgage Implosion, and How to Avoid the Next Financial Crisis" (FT press). "I mean, I was waiting for the locusts to fly through my office at one point."
"This could be comparable to the Great Depression in terms of just its effect on financial markets," said Robert Reich.
Now a professor at Berkeley, Reich was Labor Secretary under Bill Clinton. We asked him what lots of Americans are asking: How did it come to this?
"The people who were issuing warnings were not listened to," he said, "partly because Wall Street is very powerful in Washington. Wall Street kept on saying, 'Well, don't worry about anything, we have everything under control, we don't need more regulation.'"
Regulatory firewalls were put in place to prevent the financial excesses that led to the Great Depression. By the 1970s, banks and securities firms, caught up in major turf wars, lobbied for deregulation … and got it.
"We had over-leveraging in many of these firms," said Pitt, "and the net result was that people were leveraged, in some cases, as high as 100 to one."
People were also making piles of money by trading in packages of questionable mortgages and complicated, unregulated securities, called derivatives.
"Derivatives, essentially, are bets on how stocks or how bonds are going to move, and they're called derivatives because they are derived from those movement," said Reich.
But what if you bet wrong? That, say, the housing market will just keep going up but instead, the subprime mortgage meltdown happens? The whole house of cards collapses, taking Bear Stearns, Fannie Mae and Freddie Mac, Lehman Brothers, Merrill Lynch and AIG with it.
"We're scared, we're panicked, we don't even trust our money market mutual funds, which we all thought was one step removed from the mattress," said Zandi.
How's this for scared: Last Wednesday, after problems emerged in several funds, investors pulled nearly $90 billion out of others.
"Confidence, or the lack thereof, is what's driving this mess that we're in," Zandi said.
Which is why the U.S. government felt it had to intervene … fast.
"I am convinced that this bold approach will cost American families far less than the alternative: a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion," Paulson said this week, in announcing the government's bid to bail out struggling financial institutions by purchasing their bad debt, at the cost of hundreds of billions of dollars.
We know a little more today about the proposal Paulson took to Congress: it would give the Treasury two years and $700 billion of taxpayer money to buy up distressed mortgages.
And then there's this scary number: $11,315,000,000,000, to which the federal debt ceiling would have to be raised, from the current $10.6 trillion dollars.
So will the bailout end the crisis?
"I think we're in the sixth inning of a nine-inning game," Zandi said, "and I don't think this is a double-header. So I think we're closer to the end than the beginning."
"Until we know for certain we've reached the bottom, that up-and-down motion is just going to continue," Reich said.
"I think that there will be a certain amount of continued difficulty through the end of the year," Pitt predicted.
But first there's tomorrow, when markets around the world take their next vote of confidence on the American economy as it prepares for emergency shock treatment.